ChexSystems: The Credit Reporting Agency You Don't Want to Have a File With

If you have ever written a bad check or overdrawn a checking account, watch out. You may end up with a negative in a credit reporting agency called ChexSystems.

According to their website, "Chex Systems, Inc provides deposit account verification services to its financial institution members to aid them in identifying account applicants who may have a history of account mishandling (for example, people whose accounts were overdrawn and then closed by their bank)." That means you don't want to get reported to ChexSystems.

Right now, I am trying to help a friend get his ChexSystems report cleared. A few years ago, he went into what was then "P" Bank (I am not naming names since there are other banks still around with a similar name) and was told he could not open a checking account because he had $287 in unpaid checks reported to ChexSystems. Problem was, he never had a bank account with P-Bank…in fact, he had no bank account at all for years. "Show me the copies of the bounced checks and I will pay them off right now," he said, producing a walletfull of cash. The bank told him he would have to pay for the research to find the original checks, but he refused to pay for their mistake, and left.

Fast forward a couple of years, and he can't open any bank account anywhere because of this item in his ChexSystems file. (Consumers can request their ChexSystems file, if they have one, for free here.) Since P-Bank branches here have been sold, I figured if he disputed the item it wouldn't be verified and it would be removed per the Fair Credit Reporting Act.

But when he disputed the item, he received another letter back from ChexSystems with a different financial institution listed, along with the check numbers for the alleged bounced checks. He called the number listed for the financial institution that apparently had bought the account from P-Bank. I joined him using three-way calling for what turned out to be a bizarre series of phone calls. After at least an hour of calls to various toll-free numbers, he finally found a customer service representative who told him there was only a 45 cent balance left on the account, and that she would "mark it as paid." She clearly didn't believe him when he insisted he never had an account at that bank, and made it sound as if she was being very generous to mark the item as paid. No one he spoke with could offer any proof that the account was his, or provide any documents with his signature.

He could try to pursue this further with a consumer law attorney, but the five-year time limit that ChexSystems applies to reporting negative information is soon up, so the item should come off his report soon. In the meantime, if the balance shows zero, he should be able to open a new bank account. We hope.

Have you had an experience with ChexSystems? Share your comments -- and suggestions -- in the comments section below.

Why Ralph Nader doesn't use credit cards

The Motley Fool has an interesting article online today about Ralph Nader's opinion of credit cards. The famous consumer advocate and former presidential candidate, is anti-credit card for several reasons (none having to do with Dave Ramsey). Mr. Nader doesn't use credit cards because he believes they:

• are an invasion of privacy
• increase the price of goods we buy
• support big banks that are unfair to consumers

All three of Nader's points are valid. Credit cards definitely have a downside. You can add the fact that they encourage irresponsible spending and that they are easily used by identity thieves to this list of negatives. But on the other side, there are also many positives of using credit cards:

• Convenience
• Fraud liability protection on purchases
• Allows you to rent a car or book a hotel room
• Helps you deal with financial emergencies
• Good for your credit scores
• Flexible financing for larger purchases
• Potential to earn valuable rewards for spending

I love credit cards, but the way I use them is unique. I make almost all my day to day purchases using credit and pay off the balances in full online nearly every week. This way, I get all the perks of using credit with none of the financing costs or debt issues.

What do you think about credit cards? Do the positives outweigh the negatives? Share your opinion in the comments section below.

American Express branches out to Health Savings Account customers

I have a love/hate relationship with my health savings account (aka: HSA, flex account, cafeteria plan). On one hand, I love it because I can pay for my health care spending with pre-tax money.  On the other hand, I hate how complicated it is to be reimbursed. You have to save the receipts, fax them in to the company and wait a few weeks for a check to be sent back in the mail. For someone who loves direct deposit and online banking, this is monstrously slow! It's almost as bad as the mail-in rebate system!

But it looks like this old fax and mail process may be on its way out. American Express has over a million active prepaid healthcare accounts in the US and this service is outpacing 401(k) adoption according to The Nilson Report. The program is called Health Pay Plus and combines a HSA account with a prepaid credit card. Consumers who are enrolled in a "high-deductible" health plan through their employer and with a deductible above $1,000 can qualify for this account.

Visit the American Express website to learn more about the Health Pay Plus card. The Nilson Report estimates that this type of health care account would grow to more than 5 million customers over the next ten years. If we're lucky, this could put fax machines out of business!

What do you think of this American Express account? What do you think of your flexible spending account or health savings account program? Share your feedback in the comments section below.

Are you an ant or a grasshopper?

Aesop's fable about the ant and the grasshopper is one of the most basic financial lessons we are taught as children. In this story, an ant spends the summer storing up food for the winter while the grasshopper relaxes. Winter comes, the ant is well-fed and the grasshopper is miserable. You can read the whole story of the ant and the grasshopper online here.

Let's put this fable into modern context. Where would the ant and the grasshopper in today's financial world?

Ant B. Myrmeco

Credit Score: 810
Credit cards: Three credit cards with low balances and high limits
Loans: A mortgage that is always paid on time
Emergency savings: Three months worth of expenses in a high-yield savings account
Retirement savings: Puts 10% a year into his 401(k)

Grasshopper S. Caelifera

Credit Score: 640
Credit cards: One maxed-out credit card
Loans: An electronics loan, a student loan, two new car loans
Emergency savings: About $150
Retirement savings: None

The ant is well prepared for the future. He has short-term and long-term savings along with access to credit cards and a great credit score. It would be easy for the ant to use his financial resources to deal with an unexpected emergency. The grasshopper is not prepared for the future. He has a lot of debt, a low credit score and no savings. What would happen if the grasshopper lost his job, fell sick or was faced with an expensive car repair?

I am personally almost an ant. I have a high credit score and a lot of savings but no mortgage. Maybe I'm a bee instead! Are you an ant or a grasshopper? How well are you prepared for "days of necessity" in the future?! Share your opinions in the comments section below.

Advice for veterans impacted by the VA data theft

Credit.com has just posted a new must-read article online with advice for the 26.5 million veterans impacted by the recent VA laptop theft. This crime, which occurred in May and was announced this week, exposed the Social Security numbers and other data on veterans who were discharged since 1975. As extraordinarily large as this crime is, it is sadly the second largest data breach incident in recent months.  In June 2005, CardSystems Solutions announced that hackers had gained access to 40 million credit card records.

In the Credit.com article, veterans are provided with instructions for placing a 90-day fraud alert on their credit files, checking their free credit reports online, reporting suspicious activity and requesting credit report file freezes. The article also outlines several of the discounted identity theft and credit monitoring services being offered to veterans by companies such as Equifax.

What do you think should be done to help protect veterans from identity theft?  Share your questions, tips and feedback about this massive data breach incident in the comments section below.

Funny Money Friday: Bizarre Credit Cards

Money doesn't have to be boring! Each week, CreditBloggers.com takes a look at the lighter side of the personal finance world in a series called Funny Money Friday.

For nearly every interest, hobby, school or organization imaginable, there is a corresponding credit card these days. Creditors have found that consumers love "customized" credit cards and have launched thousands of unique offers. And this marketing trick works! For many borrowers, the colors and logos on the card matter more than the rates and fees.  For Funny Money Friday we're looking at some of the weirdest credit cards out there:

• World Series of Poker Card - Cash in your rewards for poker merchandise and buy-ins to poker tournaments. Fund your gambling habit with a low 13.99% APR!
• Bass Pro Shops Outdoor Rewards - Love fishing? You'll love this credit designed just for bass fishermen. Use your rewards to buy bait and tackle.
• mtvU Platinum Select for College Students - Who cares if it has a high 17.74% ARP, students can earn tickets to spring break or the MTV music awards. No mention of books or classes, but students do get rewards points for having good grades.
• Trump Card - From the classiest man on earth comes the world's finest credit card. Earn points toward comps at Trump casinos. But don't forget who you're dealing with here, this card's rate goes as high as 22.24%.
• Starbucks Student Card - Fuel those late night study sessions with a special credit card designed for caffeinated college students. Rewards points go toward buying more coffee!
• Cigar Platinum Visa - Show everyone that you love a good smoke with a credit card designed for cigar enthusiasts. No special rewards, just a credit card featuring a picture of a cigar.
  

This is just the tip of the iceberg! There are thousands of wacky and weird customized credit cards on the market today. Do you have one of these bizarre credit cards? Is there a customized credit card that you would like to see designed? Share your weird credit card offer suggestions in the comments section below! Happy Friday!

Consolidate your student loans this month to avoid rate increases

This seems to be a season jam packed with deadlines! First there was the tax deadline in  April, then there was the Medicare Part D deadline in May and now there is a deadline for locking in low student loan rates at the end of June.

Student loan interest rates are adjusted on July 1 each year. Over the past few years, these rates have been adjusted down to historical lows. But the honeymoon is about to end, student loan interest rates are expected to rise a whopping 2% on June 30. Current student loan rates range from 4-6%, depending on the type of loan.

• Stafford loan rates are currently at 5.3% and are expected to increase to above 7% at the start of July.
• Recent graduate loan rates are probably going up to around 6.7% from the current 4.7%.
• Student loan rates for parents (PLUS) are expected to increase to about 8%.

The final interest rate increases are going to be announced after next week's Treasury bill auction.  These increases could cost you some serious money. The CNN article estimates that not-consolidating this June could cost you between $2,000 and $11,000.

Luckily if you act now, you can lock in these low rates and lower your monthly payment by consolidating your student loans. If you qualify for consolidation, you need to investigate your student loan consolidation options before the end of June. 

Do you have student loans? Have you already consolidated your student loans? Share your tips and feedback in the comments section below.

Receive an additional tax assessment from the IRS? Consider appealing and get some relief from those stiff penalties.

If you receive an audit letter this year it probably means you're being audited for a tax return filed before tax year 2005. That means you were also hit with a penalty and interest for overdue taxes. If you are like millions of Americans and just pay the bill, because you think it is too much trouble to appeal, think again.  The U.S. Government Accountability Office (GAO) recently released the results of a study that seems to indicate that it may be worth your time to appeal if you have a legitimate claim. Out of almost 104,000 appeals filed in 2004, 41% pf the taxpayers won some sort of relief. Sixty nine percent of the 14,647 taxpayers filing penalty appeals earned some sort of break for their efforts.

You have a choice: pay the taxes, penalties and interest; or appeal the IRS claim:

1. Whatever you do, don't ignore the audit notice!  The Internal Revenue Service is a bill collector with teeth. If you do owe money, the sooner you pay what you owe, the less interest and penalties you'll owe.
2. Educate yourself. Read IRS Publication 1, "Your Rights as a Taxpayer." 
3. Don't rush ahead with the audit if you are not prepared. Some audits are conducted in person and others on the telephone. Ask for a postponement if you need more time to gather records.
4. Be friendly and treat the auditor as a human being. Auditors are people just like you and want to do their job. Act like the auditor is your boss and treat him or her with respect.
5. Organize your records.  Remember you have to prove that you don't owe more money. So gather and organize all of the documentation you will need to prove your position. Explain clearly why you don't owe the taxes the IRS claims you do, and offer proof for your statements. Make sure you review your records so when you are asked questions you can answer intelligently.
6. Be truthful but never volunteer information – respond to questions you are asked and nothing more.
7. Keep original documents. Don't let the IRS auditor keep your originals—they are yours.
8. If you're wrong, admit it and pay the tax – the sooner the better.
9. If you disagree with the outcome of the audit, ask the appeals office to review your case.

If you decide to file an appeal the process will probably take about a year. The first thing to do is to educate yourself: There are many types of appeals. Some of the more common types include penalty appeals, innocent spouse disputes, equitable relief, and cases where a taxpayer experiencing financial hardship asks the IRS to accept less than the full tax amount owed. To learn more about appeals read IRS Publication 5 and Publication 556.

Once you file your appeal, go back and read all of the tips above numbers 1-10 again. Appeals officers are more experienced and generally more knowledgeable about tax law than auditors, collection staffers, and anyone answering the phone line at the IRS. They are authorized to settle appeals based on their assessment of the legal merits of your case – if the appeals officer thinks you have a good chance of winning in court they will try to settle with you. The appeals office has a very successful track record of resolving appeals so you will want to be very prepared and organized, or you can hire a tax attorney. 

If you lose your appeal and are not satisfied with the outcome, you can take the IRS to court. If there is a lot at stake, it is probably a good idea to hire an attorney at this point, although you may choose to go it alone.

Have you talked your way out of an IRS penalty? Have any good tips for an IRS audit? Share your experiences about IRS audits and appeals in the comment section below.

Credit card review: Citi Driver's Edge Platinum Select Card

With gas prices still above $3 a gallon in most places - and sometimes nearly $4 a gallon out here in California - it may be time to think about opening a gas card. Gas cards were to be traditionally used by people who are establishing their credit because they were easy to be approved for.  Since many old fashioned gas cards could only be used at one company's pump, they've gone out of style a bit.

But there's a new breed of gas card in town. These new cards work more like rewards and mileage cards. Today we're going to take a closer look at one of these "new breed" gas cards to see how it stacks up. Let's review the Citi Driver's Edge Platinum Select Card:

• APR - A low 13.99 %. This rate is amazing for a gas card and still really low for a rewards card.
• Other APRs - 0% on balance transfers for 12 months and then the standard 13.99% rate thereafter. 22.99% on cash advance requests.
  
• Default APR - 31.99% is a very high default rate. This is about as high as any standard credit card issuer will go. Most default rates are in the mid 20% range.
  
• Annual Fee - None.
  
• Other Fees - $15 to $39 per late payment depending on balances. $35 over-the-limit fee. 3% cash advance fee for each transaction. $15 to $39 over the limit fee.  3% foreign currency conversion fee for international purchases. It's nice to see this foreign currency fee being disclosed openly, but it would be even better if they didn't charge it.
  
• Universal Default Clause - Citi mentions that they will raise your interest rates if you make a late payment, bounce a check or go over the limit on any of your Citi accounts. It's not quite "universal" but it's still a little dangerous.
  
• Perks - This is where the Citi Driver's Edge Card has an advantage. For a card with a low rate and no annual fee, these are good rewards. You'll earn 6% back for 12 months on supermarket, drugstore and gas purchases. After 12 months this rate drops to 3% plus 1% for all other purchases. You'll also earn $1 rebate for every 100 miles you drive, up to $500 a year. Then, you can put your rebates toward buying a car, repairing a car or as Thank You points.
  
• Negatives - All these different rewards are kind of confusing. You'd have to be pretty sharp to make sure you get them all.
  
• Acceptance Requirements - You need to have a good credit score (at least above 700) to qualify for this card.

Overall, the Citi Driver's Edge Platinum Select Card can help take the sting out of buying gas. If you drive a lot, you can use this card to earn some pretty significant rewards and rebates. Even without these perks, this card is a good choice for its nice low interest rate and no annual fee.

Medicare's Prescription Drug Plan: Let's Ditch the Penalties

The May 15th deadline has come and gone for seniors to sign up for Medicare Part D, that new, incredibly confusing program that will help them pay for prescription meds. The way things stand now, most folks who missed the deadline will face monthly penalties once they do sign up. The next enrollment period is between November 15, 2006 and December 31, 2006 - with coverage beginning January 1, 2007.

I've seen monthly penalty estimates ranging from an average of $2.31 to $2.50. That doesn't sound like a lot … until you factor it in as an additional, fixed monthly expense … for as long as the person lives! All because of a missed deadline? C'mon, let's cut them some slack.

If you agree that these penalties ought to be axed, you'll be glad to hear that there's talk in both the House and Senate about doing just that. Tell your legislators that you support a penalty-free Part D. It's so easy to drop them a quick email. Just click here

The Deadline Is Irrelevant to Lots of Folks
One of the things that bothers me most about all the Medicare Part D deadline talk is that there are many  people who are still eligible and should be applying now, but may not, because they think they messed up. AARP has put together a list of around a dozen exceptions to the rule, which includes everyone who's become eligible for Medicare since February, 2006. Ditto for folks who move out of their drug plan's service area, be it into or out of a long-term care facility or not. Most important, low-income seniors have until the end of the year to sign up for extra help. When in doubt, call 800-MEDICARE or visit Medicare's site.

Write Quickly
You might want to send that email to your reps sooner rather than later. Congress is about to go off on yet another vacation. While most of us get a day or two days off for Memorial Day, they get a whole week. (That's what they took for St. Patrick's Day, too.)

As The New York Times points out in an editorial, "while they're gone, federal disaster unemployment benefits will start to expire for some 80,000 people still out of work because of Hurricanes Katrina and Rita. Both houses have only a few days left to extend this much-needed aid. … The average benefit is $104 a week — and that is for people who lost everything and, in many cases, loved ones only nine months ago." You might want to mention this in your emails, too!

In fact, Congress is on track for spending less time in session than it has since Harry Truman complained about the "do-nothing Congress" of 1948, which met for 108 days. I read about this year's estimate - 97 days – in a great USA Today piece by Kathy Kiely.

Hmmm ... maybe we're better off having our elected officials spend less time together in DC. What do you think? Share your opinion in the comments section below.

Experian report shows sharp increase in consumer debt

An Experian study released today has found that consumer debt has increased 12% over the last two years. In 2004, consumers reported carrying an average $10,371 balance of non-mortgage debts. In 2006, this amount increased to $11,669.  At the same time the average number of late payments also increased 20%.

Does this report match your financial situation? Are you carrying more debt than you were last year? Do you think these negative debt figures will continue to grow in the coming years? Share your feedback in the comments section below.

Speak out against the Financial Data Protection Act today

We have previously discussed our concerns about HR 3997 on CreditBloggers.com. If passed the Financial Data Protection Act will only add a few national benefits in exchange for stripping away the tough consumers laws enacted in specific states. For example, HR 3997 would undo California's laws that require the credit bureaus to allow file freezes and that require businesses to notify consumers when their personal data is lost or stolen. Here's what we wrote back in March:

A bill recently passed the House Committee on Financial Services that would replace the strong identity theft protections in California and other states with weaker rules. The Financial Data Protection Act (HR 3997) only requires companies to report data breaches when they are "likely to result in substantial harm."  The bill also would only allow credit report file freezes for Americans who have already been victims of identity theft. PIRG's Ed Mierzwinski likens it to "You've already been shot, so they give you but no one else a bulletproof vest."

If you are against HR 3997, you can now send a letter to congress through HandsOffMyCredit.com. You can also read more about why the US Public Interest Research Group opposes HR 3997.

What do you think of the Financial Data Protection Act? Is it going to help or hurt consumers in your state? Share your feedback and opinion in the comments section below.

Blogs we like: I Want a House

CreditBloggers.com doesn't just love writing about personal finance, we also love reading about it! Once in a while, we like to feature a blog that has caught our attention. Today, we're talking about the blog I Want a House.

The author of "I Want a House" is an average Joe named Dave. He is in his 20's and has the goal of buying a house in Acton, MA. Dave is just about to sign the final papers on his first home and has a lot to say about the process. If you are thinking about becoming a homebuyer this summer, this is a must-read blog. Be sure to check out his posts on the trials and tribulations of finding a home and managing his new budget.

What's your favorite personal finance blog? Share your recommendations in the comments section below.

The worst credit score mistake you can make

Good credit can save you thousands on loans, credit cards, insurance, utilities, cell phones and more. While it takes years to build up a great credit history, it can take only a few months to destroy what you've earned. In fact, dropping your credit scores by a few hundred points only takes 90 days.

You see, one of the worst credit mistakes you can make is letting an account become 90 days overdue. 30 and 60 day late payment records are damaging too, but their credit score impact is only temporary. When you are 90 days late on a credit card or loan, your credit score will drop significantly and the damage will continue for up to 7 years. One 90 day late payment is as bad for your credit score as filing for bankruptcy. You can read more about how late payments really impact your credit online here.

Do you have trouble making your payments on time? It may be time to crack down on your monthly finances. Create a detailed spending plan so you know exactly where the money needs to go each month. Sign up for an automatic bill payment system through your bank. With a little planning, you can make paying your bills a snap and can avoid destroying your credit scores.

What is your system for paying bills and managing your monthly spending? Do you use Quicken and track every check? Or do you have a more casual system worked out? Share your feedback and tips in the comments section below.

Must-Read: Investigating person-to-person lending

Salon.com (subscription or ad-viewing required) has a great article online today about the growing person-to-person lending industry. Sites like Prosper.com work as a virtual eBay of lending, connecting borrowers and investors to finance three year loans. Promising reasonable rates and good returns for investors, person-to-person lending is becoming a viable alternative to traditional personal loans.

This article addresses the benefits and risks of person-to-person lending operations. While the concept seems simple, there are equal opportunity lending laws and long term success rates that have yet to be considered. And there is also the simple fact that most traditional lenders and creditor understand risk extremely well. Credit scores aren't perfect but they are a very accurate way to predict whether someone will default. Would you be willing to bet on someone that traditional banks have passed by? Here's one example mentioned in the article:

If I told you about Person X, who had a credit rating of H.R. -- "high risk," the lowest rating -- a string of recent delinquencies, and a 20 percent debt-to-income ratio, you'd probably conclude that she was heading straight to bankruptcy. Lending this person money would be about as profitable as throwing it into a fountain and waiting for your wish to come true. But what if I also told you that this person, Suzy, had accumulated her debt while she was studying at Harvard Law School? And what if I mentioned that she had just graduated with honors, and had accepted a job at a Manhattan firm with a starting salary of $140,000 a year? She only needs a loan to tide her over until she starts work. Now I tell you that she's willing to pay a 20 percent interest rate on your money. Would you take a risk on her now?

Read the article online and let us know what you think. Would you borrow through a person-to-person lender? Would you lend your own money through this kind of service? What do you think will happen to sites like Prosper.com in a few years? Share your feedback in the comments section below.

26 million military veterans at risk for identity theft

Good guys just can't seem to catch a break today! First there was the announcement of blood donor records being stolen from the Red Cross, now it has been reported that 26 million veterans have had their information stolen too. Are firemen, preschool teachers, Peace Corps volunteers and librarians next?

In this latest identity theft case, a laptop from the Veterans Affairs Department was stolen from an employees home. This computer contained sensitive records, including Social Security numbers, on all veterans who were discharged since 1975 and some of their spouses.  Concerned veterans can learn more about the crime online here. It is not clear if the data was encrypted or password protected in anyway. The article ominously mentions that the employee "did not follow procedures to safeguard the data."

In most data theft cases, only 2% of the people who had their information stolen will face actual identity theft crimes.  In this case, 2% equals a whopping 520,000 veterans.

Are you a veteran who may be impacted by this data theft crime? What do you think about these recent data theft incidents? What group of "good people" do you think will be impacted next? Share your feedback in the comments section below.

Blood donors targeted for identity theft in Missouri, Illinois and Kansas

In yet another sad case of "bad things happening to good people," it has been reported that a former Red Cross employee in St. Louis stole the personal records of over 1 million blood donors. Donors in Missouri, Illinois and Kansas had their Social Security numbers and other records used to open fraudulent credit cards and other accounts.

Few cases of identity theft have been tied to this data theft so far. Investigators are asking that blood donors who have recently been victims of identity theft come forward with their cases. Possible victims should call 1-866-908-7747. The Red Cross also has reporting instructions online here and has offered to reimburse donors for the cost of credit reports ordered before June 30. The Red Cross also noted that Social Security numbers are not required by donors and have been optional for 10 years.

What can you do to keep your identity safe from this type of crime? Be very cautious about how and where you share your personal information. Avoid providing your Social Security number to doctor, dentist and other medical providers unless is it mandatory. What steps do you take to keep your identity safe? Share your feedback in the comments section below.

Funny Money Friday: Counteracting financial nightmare week

Money doesn't have to be boring! Each week, CreditBloggers.com takes a look at the lighter side of the personal finance world in a series called Funny Money Friday.

It has been a rough week for the CreditBloggers team! I accidentally overpaid my credit card bill and Valary Miller experienced a perfect storm of check and banking errors. Altogether, we've spent way too many angry hours calling customer service departments this week.

In order to counteract our financial angst, we're going to use this week's Funny Money Friday to think good thoughts about financial services companies that don't give us ulcers. Companies with helpful customer service, excellent rates and great products. Here are a few of my personal picks:

• ING Direct - Saving couldn't be any more simple than with this company. ING Direct offers 4.15% yield on online savings accounts along with other lending and investing services. Transferring money is easy, account statements are posted online and their security measures are top notch.
• American Express - Blue from American Express is my personal favorite credit card. It's got a low rate, no annual fee, a great rewards program and easy online banking.
• Washington Mutual - I haven't had any negative experiences with Washington Mutual, which unfortunately is saying something with banks these days. My accounts are managed correctly, their online banking works well and their bankers are personable. I am miffed that they are not making their new Free Checking services available to existing customers, but I still give them a gold star.
• OnCenter - I've been using Yodlee's free OnCenter program for almost three years and I love it! You can view all your banking, savings, credit card and investment accounts in one secure location with this service. It makes managing your money a snap.

I can feel my stress levels falling already! For every negative financial experience we've had this week, there has been a positive experience balancing it out.

What are some of your favorite banks, credit card companies and financial institutions? Least favorite? Share your picks in the comments section below. Happy Friday!

Ameriquest: The Times They are A-Changin’

Giant Ameriquest cut a wide swath in sub-prime mortgage market. They were the sponsor of the SuperBowl half-time show and the recent Rolling Stones tour. On the darker side, they agreed to pay about $300 million dollars in fines to the 49 states which had accused them of bilking their customers through unethical practices. Now they have announced that they are completely changing their business model. They are closing all 229 retail branches and laying off over 3,800 employees. Their new business model is to solicit loans over the Internet.

One suspicion is that the branches could only be profitable when they were gouging clients. Without that extra income, the operation becomes unprofitable. Another possibility is that the 3,800 employees were making good money when they could gouge customers, but wouldn't work under ethical constraints that cut their income. If they all left, I don't know where you'd immediately find 3,800 new people with higher ethical standards.

The sub-prime loan business has attracted some pretty skuzzy people, but it's hard to believe that you can't run a profitable business AND be ethical at the same time. Sadly, that may be the case. It is possible that the rest of the industry is just like this, but they haven't been caught.

This demonstrates fairly graphically the seamier side of the mortgage business. Smart borrowers make sure about the ethics of the companies they do business with.

What do you think of your mortgage company's ethics? Have you worked with Ameriquest? Share your feedback in the comments section below.

What to do when the bank incorrectly debits your checking account.

When nothing but screaming seems like the best thing to you – go ahead and scream. It is somewhat cathartic. You might also complain a lot to your friends and office mates.  Then take control. And, take a lot of notes – who you talk, when and what they tell you.

I did all the right things. I wrote a check for $210 to pay my credit card account in full, as I always do; sent it in on time as I always do; and went about my business, thinking all was well in my credit world.  Then two days ago I went shopping at the local grocery store, debit card in hand.  After three tries the card wouldn’t go through. The card was declined. After some momentary blushing and smiling at the people in line behind me, I thanked the clerk and walked out of the store feeling everyone’s eyes on me.

I phoned my credit union within minutes to learn that my account was overdrawn by $900.  WHAT?  How was that possible? The voice explained that I had just written a check for $2,100 to some bank I had had never heard of.  I pulled up my computer software, where I track everything related to money and patiently tried to explain that the check he referred to was for $210 to pay off my credit account. The voice explained that it must have been a clerical error and that everything would be taken care of by close of business that same day.  The voice promised me that all of the hefty overdraft and transfer fees would be reversed and no checks would be refused.  I left my cell phone number just in case there were any problems. Okay, seemed easy. 30 minutes later I got a voice mail from Jocelyn at the credit union who apologized and said the issue couldn’t be resolved until first thing in the morning and assured me it would be taken care of then. Great – good customer service, now I can relax. Wrong.

Next morning I checked my account on-line – hoping all was well.  Nope, still overdrawn.  I phoned the credit union again.  I was told I had to complete a form disputing the incorrect charge.  Why, I asked didn’t they tell me that yesterday? I screamed again, completed an on-line form and waited. Still nothing. So I escalated the issue with the manager at the credit union.  Within two hours my money was returned to my account and all of the overdraft fees were reversed. But, I was told that, the bank which processed the credit card account was the one that made the error.  The manager told me that the credit union couldn’t process a partial payment; they could only stop payment or pay the entire amount.  They advised me to contact the credit card company so it wouldn’t hit me with late payment and finance charges.

So, I grumbled, and phoned the credit card company. The credit card company told me to send them a letter disputing the charges.  I should write a letter? What’s a girl to do, but scream again?  After another hour on the phone and four conversations with the managers there, I was told my account had a credit balance and that I should not worry - I wouldn't be hit with any fees; and my next bill would correctly reflect the error on their part.

Do I believe it? No. I will still check both accounts vigilantly for the next couple of weeks. Since it is every consumer’s job to keep their credit reports clean, I know I also have to monitor my free annual credit reports to see how, or if, this gets reported.  That’s where the notes will come in handy.  I have my fingers crossed I won’t need them. 

What would you have done in my situation? Has your checking account been overdrawn due to a clerical error?  What did you do?  Do you have a great story to share? Post your feedback in the comments section below.

How Can I Cancel Private Mortgage Insurance (PMI)?

Question: A reader asks:

What is the process/requirements to have the PMI removed from your mortgage payments? My mortgage note if fairly high, however $398.00 of it is PMI. Can you tell me how I can have this removed?

Answer: Great question! You are paying almost $400 a month for Private Mortgage Insurance (referred to as PMI or MI), and that is a good chunk of money you could be using to save, invest or even pay off your mortgage faster.

For those who might not be familiar with PMI, it is insurance that protects the lender if you default. It is typically required on low down payment loans because they are especially risky in the first couple of years. Many times the borrower pays PMI, but there are loans with lender-paid MI as well.

PMI sometimes gets a bad rap, but it does have its place. Thanks to PMI you were able to get into your home with little money out of pocket, and hopefully you have benefited from the appreciation in home values that's been going on across the country.

The downside is that PMI can be expensive, and it is often priced according to your credit score, so the worse your credit, the higher your premium.

Currently PMI is not tax deductible, though there appears to be serious interest in Washington in changing that. Some experts suggest that instead of paying for non-deductible PMI you get a "piggyback" loan, which is typically a first mortgage for 80% of the purchase price, and a second mortgage for the remaining 10% or 20%. Interest payments on a second mortgage generally will be tax deductible if you itemize.

But that doesn't always make the piggyback better than PMI or vice versa. You will have to do a little number crunching to decide. The PMI Group, which promotes PMI, offers a calculator you can use to compare a loan with MI to a piggyback loan. The Mortgage Professor Jack Guttentag offers a calculator that will help you figure out how long you will have to pay MI.

Whether or not PMI becomes tax deductible in the near future, it doesn't make sense to pay the premium if you don't have to. So how do you drop it? The Homeowners Protection Act, a federal law, allows you to request to have PMI cancelled when you pay down your loan to 80% of its value when you took out the loan, as long as you have been making your payments on time and the value of your property hasn't declined. Lenders are supposed to automatically cancel PMI when your loan balance reaches 78% of the value when you took out the loan. That law applies only to home loans made after July 29, 1999.

What if your house has gone way up in value since you took out the loan? Or what if you have an older loan? If it has been sold to Fannie Mae or Freddie Mac (lots are) then you probably in luck. Their guidelines require that PMI be terminated on all existing loans they have purchased when they reach the mid-point of the mortgage amortization period (e.g., 15th year on a 30-year mortgage) or when the mortgage is scheduled to reach 78 percent of the original property value if the loan payments are current.

In addition, private mortgage insurance on mortgages owned by Fannie Mae can also be cancelled at the borrower's request when the LTV reaches 75% based on the current value of the home as established by a new appraisal, provided that the borrower has a good payment history and that the loan is at least two years old. If that's the situation you are in, contact your lender for details about how to request cancellation. They will likely require you to pay for an appraisal, but if you are successful, then you will no longer have to fork over that $398 a month.

This is what happened to me recently. I had purchased an investment property with a 90% loan. The lender required PMI, and at about $250 a month, it was pricey. When I was almost to the two-year mark on the loan, I called and requested the lender's PMI cancellation package. I filled out the paperwork, paid $250 for an appraisal and soon my PMI was cancelled.

Have you had trouble cancelling PMI? Or do you have a question for our credit experts? Share your feedback in the comments section below.

Innovis...What Exactly Are They?

Yesterday we finished a 3-day blog series, which reviewed and ranked the three major credit reporting agencies on CreditBloggers.com.  Your can read Experian's review online here, Equifax's online here and TransUnion's online here. 

I was asked about Innovis and what I thought of them.  At first I wasn't going to even mention them because I don't really consider them to be a legitimate player and I didn't want to imply that they were on par with the big three.  But after thinking about it I figured it wouldn't hurt to say a few words about them.

Technically Innovis is a credit bureau as defined by the Fair Credit Reporting Act.  They are a part of CBC Companies (Credit Bureau of Columbus in Ohio), which use to be one of Equifax's largest system affiliates until they decided to go solo several years ago. 

The history of the credit data that makes up the Innovis database is interesting.  I'd call it "well traveled."

Since 1991 the data has been owned by Consumer Credit Associates (CCA) in Houston, First Data Corporation in Omaha and now CBC in Columbus.  What we have here is too much credit data to simply discard but not enough data to become a full-fledged credit bureau on par with the big three.  First Data was close to entering the credit bureau market in the 90's but decided against it and sold the data in what was described as a "fire sale" to CBC.

The service that kept the lights on for many years when the data was owned by CCA was called FailSafe.  FailSafe, which is still offered by Innovis today I believe, is a service that's sold to companies (mostly credit card issuers) that mail offers to consumers.  I'd call FailSafe the "disaster screen" of the preapproved mailing process.  Lenders would pay to have their list of preapproved candidates scrubbed up against the FailSafe database in search for any negative items that were missed by the credit bureaus during the list selection process.  If they found something negative the consumer’s name would be kicked out and they wouldn't receive the offer from the lender. 

There is no FICO score available via Innovis (guess why) and they don't sell products to consumers.  In fact, I don't think I've ever seen my Innovis credit report.  I've asked for it several times in writing and I've got the right to several freebies because of where I live but they won't send it to me. 

And every time I call them I can't get a live person unless I choose the option reserved for fraud victims so that's no help.

If I graded them using the same scale I used for the big three it wouldn't be fair.  They wouldn't get any points.

Let's just say that they are the same quasi credit bureau that they've been since 1991, just with different wrapping.

Questions about Equifax, Experian, TransUnio or Innovis? Comments about this credit bureau series? Share your feedback in the comments section below.

Reader Question: Boosting a credit score before January

We receive an email form Bernice in Georgia this morning. Bernice is getting ready to refinance her mortgage and needs to improve her credit score over the next few months:

I need to boost my credit score 33 points by January in order to have a 620 FICO score to refinance my house.  What would you suggest that I need to do?  I have an $11,000 car loan with a 15.9% interest rate and a line of credit with a limit of $15K. I have a balance of $14,800 on the line of credit.  Is this balance hurting my score?  Please advise.

In most situations, the best place to find tips for improvement is directly from the source of your credit scores. Order all three of your FICO credit scores online and read the detailed analysis that accompanies the scores. Because this analysis is based on your own credit data, it can give you specific advice for how to boost your score. It's not possible to give blanket advice such as "pay off your credit cards" because it may impact each person's score in a different way.

Not knowing more about Bernice's credit profile, it's difficult to say exactly what will improve her credit score. Having a nearly maxed out balance on a line of credit probably is one major factor impacting her credit score. Before January, she should aim to reduce the line of credit balance below $5,000. Since debt-to-income ratio is also used in the mortgage calculation, reducing this balance can help reduce your rates two ways. Bernice should start working with her mortgage lender now to see exactly what she needs to do to improve before January.

Have a question for our credit experts? Send us an email or share your question in the comments section below.

Budget buster: Tips for managing the costs of being a wedding guest

Spring wedding season is in full bloom! For most of us, that means at least one or two weddings on the horizon. Each wedding can cost a guest a few hundred dollars including gifts and travel. If you are a part of the wedding party, you could end up spending a few thousand. Are you prepared to deal with the costs of being a wedding guest this summer? Here are some tips to help:

• Be creative, not cheap - It's easy to end up spending hundreds on wedding gifts over the summer. You don't want to skimp on someone's special day but you can reduce you costs by thinking of creative ways to give great wedding gifts. Consider using your unique talents to make a special gift such as a portrait, piece of furniture, help landscaping or the wedding cake. If you are a relative, give the couple a family heirloom. The newlyweds may appreciate a creative and thoughtful gift more than a blender anyway.
• Carpool - With gas at $3.50 a gallon, it makes sense to carpool to a wedding that's far away. If you don't know of another guest in the area, contact the bride or groom to see if they can set up a connection. Your offer to drive Uncle Stan to the wedding may also be doing the couple a favor.
• Find roommates - Instead of renting an expensive hotel room for you and a guest, investigate alternatives. A group of friends may be able to save by splitting a vacation rental instead. Or see if you can stay at a relative or friend's house in the area.
• Be honest - If you are struggling to afford the costs of being a bridesmaid or groomsman, talk about it with your friend. You might be able to do your own nails or skip one of the bridal showers.  Work with your friend to find a solution that makes them feel good and doesn't require you to go into deep credit card debt.
• Bridesmaid tip - A friend of mine who has been a bridesmaid almost a dozen times always gives her dress to the bride as a wedding gift. The bride loves having it as part of their wedding memories and you'll save some money. Don't forget to dry clean the dress first and wrap it up nicely in archival paper.
• Plan ahead - Estimate the costs and develop a plan early. This might not be the right time to stretch yourself thin financial. If money is going to be tight, consider delaying a big purchase or saving up a few months in advance.
• Bite the bullet - As difficult as it can be on a tight budget, sometimes you just need to accept the expense of the wedding. Being too focused on cutting costs can make you seem like a major stick in the mud and can hurt the couple's feelings. If you have to spend beyond your means, at least use a credit card with a low interest rate and good rewards.

How many weddings are you going to this year? Any great tips or suggestions? Share your feedback in the comments section below.